Although the theoretical literature on political influence uses lobbying
and corruption interchangeably, the
attendant empirical literature associates lobbying with the preferred mean for exerting political influence in
developed countries and corruption with the preferred one in developing countries. This paper challenges
these views. Based on whether influence is sought with rule-makers (lobbying) or rule-enforcers (corruption),
we develop a conceptual framework that highlights the defining impact of political institutions on lobbying
and corruption. We test our predictions using 2002 survey data for 6000 firms in 26 countries. Our results
show that (a) lobbying and corruption are indeed fundamentally different, (b) political institutions play a major
role in determining whether firms choose to lobby or corrupt, (c) lobbying is a more effective instrument for
political influence than corruption, and (d) lobbying is a stronger explanatory factor for firm performance than
corruption, even in poorer, often perceived as highly corrupt, less developed countries.
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happens, lobbying rules"
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